If you work out and use nutritional supplements -- in my case, protein powder and creatine -- then you're familiar with MusclePharm. Unlike many supplement manufacturers, MusclePharm products seem to be everywhere: On the shelves of major brick-and-mortar stores like Costco, GNC, and Vitamin Shoppe, online at outlets like Bodybuilding.com... if you've ever purchased a nutritional supplement, chances are you've at least considered a MusclePharm product.

Yet until recently the company wasn't profitable -- in spite of enviable brand awareness and tremendous growth.

Sounds odd, right? Ryan Drexler thought so, too, but he also saw a great opportunity -- first as an investor, then as a board member, and starting last year, as the company's CEO.

Ryan leveraged his experience from building and selling Country Life, a successful sports nutrition and vitamin company, to build on the existing brand awareness and reach of MusclePharm, and make the company profitable. Along the way he's dramatically reduced expenses, eliminated dozens of unprofitable SKUs, terminated expensive celebrity endorsement deals, made a major international push... and recently launched a line of all-natural, organic products.

And made plenty of tough decisions.

You built Country Life, a successful company, and sold it... so why get back into the nutritional supplement business?

One, as an entrepreneur I learned a number of valuable lessons. Going through the ups and downs, learning the day-to-day of building a business... even selling Country Life taught me a lot.

Then, why MusclePharm? I love the business. I live an organic lifestyle, I'm an avid Brazilian Jiu-Jitsu competitor, I surf, I mountain bike... I live the lifestyle, I take the products -- it's a natural fit for me.

After I sold Country Life I was investing in similar types of businesses, learning about them and being an activist investor, and MusclePharm was intriguing. I couldn't believe the brand recognition. It was everywhere: From mom and pops, to vitamin shops, to Costco, to international. I was in Germany and saw someone wearing a MusclePharm t-shirt.

Slowly but surely bought some stock on the open market. I knew people that knew the prior management, I approached them and realized I was a natural fit to be on the board and could have a big impact. I felt I could have a really big impact.

Then I saw a lot of things that needed to change.

Like...?

A major way they built the business was through very large endorsements. In the beginning that approach worked out well, but eventually they had to start paying for those endorsements and the size of the company didn't match up. They were thinking sales would double, triple, quadruple... and while sales did go up nicely, the endorsements were a tremendous expense.

That's also when they increased the number of SKUs. Take Combat Protein, one of our most valuable SKUs. The thinking was, "We have 7 SKUs, so why not 20? And then why not flavor extensions: Peach Swirl, Raspberry Swirl..."

That led to a massive amount of inventory. We had 400 SKUS and that, coupled with the endorsement deals, drained a tremendous amount of money from the company. The brand was everywhere. With Tiger Woods, Arnold, the UFC, etc, the brand recognition was great... but all those expenses made the company extremely unprofitable.

Top line is great (especially at first) but eventually the bottom line is everything.

Profitability is just as important as sales, and you want to run the company on the cash flow of the business. If you have to keep borrowing and leveraging and diluting investors, you don't build a company to where it should be.

What we had to do was restructure the business. We had to look at every part of the business that didn't work. We needed to get back to core SKUs; 400 SKUs was not the way to move forward.

So we cut close to 300 SKUs. That's how many that weren't selling. The inventory as burning so much cash. It was a logistical nightmare. They were turning inventory 2 to 3 times a year.

Now we're turning 12 times a year. Inventory turns produce cash.

The issue of endorsements is fascinating, because many companies in the health and fitness industry rely on celebrity endorsements.

Granted some of our endorsements deals were generating sales, but they were still unprofitable. An example is the Arnold line. We were repackaging MusclePharm product for the Arnold line, which created expense, then add the endorsement expense on top of that... and I had to make the hard decision and say it wasn't working for the future of the company.

At the end of the day nothing is bigger than the MusclePharm brand. Educating people on Arnold, and Arnold's products, wasn't the vision I had going forward.

One of the biggest mistakes entrepreneurs make is to not recognize that sometimes lower sales revenue can be much more profitable than higher sales revenue. It's easy to think, "Sales, sales, sales," but sometimes lower sales is better and more profitable.

It's not all about top line.

So we cut Arnold. We cut Tiger; having MusclePharm on Tiger's bag was not prudent. We cut the Cleveland Cavaliers endorsement deal. Those deals may be right for billion-dollar companies, but they just didn't make sense for us.

Cutting SKUS didn't just reduce inventory and fulfillment costs; that should have created internal efficiencies as well.

Absolutely, and that led to another hard decision: Our number of employees going forward.

I believe in efficiencies. I believe in having the right people in the right places. At one time we had around 170 employees; now we have 65.

The hardest decision you make as a CEO is to let people go, but that's my job. It's my job to make hard decisions. You have to do what's right for the company; someday an unprofitable company won't employ anyone.

Oftentimes the people that stay are then able to shine even more. Lots of companies are top-heavy but once you deeper you see the teams are doing everything; the executive or manager is just taking the credit.

Keeping a company streamlined avoid a tremendous amount of cash burn.

But we didn't just pick a number. We didn't just say, "Let's cut staffing by 30%" or some other arbitrary number. You have to know what each department does and what the people really do. As CEO I dip into each department, spend fifteen to twenty days really understanding what they do... that's the only way you can make good decisions.

You have to listen, learn, educate yourself... only then you can make good decisions.

Still: Plenty of people feel it's impossible to save your way to profitability.

I agree, but making a company stronger is not necessarily just about growing the top line. The key is to build a company that has synergy between sales and profitability. That's a huge lesson that every entrepreneur needs to learn.

What we've done has put us in a very strong position. We're back to hiring in significant areas; we just hired an unbelievable CMO. Entrepreneurs need to surround themselves with smart people who can make good decisions that will make the company stronger.

Sometimes you have to take a few steps back to put you in a great position to take a bunch of steps forward.

You've also revamped your manufacturing processes.

You need multiple manufacturers. Starting with and sticking with just one manufacturer doesn't do your company justice. We have a breadth of manufacturers to make sure we can move the company forward in the right way.

In addition, we've started manufacturing products in Europe. Sending product overseas isn't the most profitable way to do things. We manufacture in Belgium and saw a nice margin increase as a result.

International growth is a tremendous opportunity, We're going to be label-compliant in the U.K. That's incremental business we've never had.

And the Natural Series is probably the most important product launch we've ever had.

I'm surprised more nutritional supplement companies haven't entered the organic space.

That's because it isn't easy. We're USDA certified organic. It took us eight to nine months to reach that higher standard of organic. Of course that's why Sprouts took us in so quickly.

Organic is a huge opportunity. From the Amazon purchase of Whole Foods, their efforts to buy into organic farming... organic is huge.

MusclePharm already has huge brand recognition, but adding organic lets us be a company that provides products for every person in the household. It really rounds out the MusclePharm name.

Testing is clearly important. Some supplement companies have sold products that worked... but they included ingredients not listed on the label.

All of our products are tested for banned substances so athletes can use them with confidence. Beyond that, we want customers to be able to make informed choices. We want people to get what they expect -- and to get what we say they get.

We just did a partnership with the Air Force because of all the certifications we've earned. Quality is the most important thing. We're building a real brand. When you're a company that is north of $100 million, you have to lead by example.

Say I'm an entrepreneur and you can only give me one piece of advice. What would that be?
Top line growth doesn't equate to success. MusclePharm sales are smaller than they once were, but we're a much stronger company than we were a few years ago.

Sometimes you really do need to step back and shrink your business in order to grow it.

Focus on what you do do best, and don't get distracted by some of the stuff you can do... but shouldn't.

Published on: Aug 18, 2017
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